Correlation Between Johnson Core and Johnson Institutional

Can any of the company-specific risk be diversified away by investing in both Johnson Core and Johnson Institutional at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Johnson Core and Johnson Institutional into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Johnson Core Plus and Johnson Institutional E, you can compare the effects of market volatilities on Johnson Core and Johnson Institutional and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Johnson Core with a short position of Johnson Institutional. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Core and Johnson Institutional.

Diversification Opportunities for Johnson Core and Johnson Institutional

0.93

Correlation Coefficient

Johnson Core  Johnson Institutional

Almost no diversification

The 3 months correlation between Johnson and Johnson is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Core Plus and Johnson Institutional E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Institutional and Johnson Core is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Johnson Core Plus are associated (or correlated) with Johnson Institutional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Institutional has no effect on the direction of Johnson Core i.e., Johnson Core and Johnson Institutional go up and down completely randomly.

Pair Corralation between Johnson Core and Johnson Institutional

Assuming the 90 days horizon Johnson Core is expected to generate 1.2 times less return on investment than Johnson Institutional. But when comparing it to its historical volatility, Johnson Core Plus is 1.06 times less risky than Johnson Institutional. It trades about 0.13 of its potential returns per unit of risk. Johnson Institutional E is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,429  in Johnson Institutional E on December 20, 2024 and sell it today you would earn a total of  42.00  from holding Johnson Institutional E or generate 2.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.33%
Values	Daily Returns

Johnson Core Plus  vs.  Johnson Institutional E

Johnson Core Plus

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Core Plus are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Johnson Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Johnson Institutional

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Institutional E are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Johnson Institutional is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Johnson Core and Johnson Institutional

The main advantage of trading using opposite Johnson Core and Johnson Institutional positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Core position performs unexpectedly, Johnson Institutional can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Johnson Institutional will offset losses from the drop in Johnson Institutional's long position.

The idea behind Johnson Core Plus and Johnson Institutional E pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.